More on Spain, Switzerland, The U.K., And the Fallacy of Composition

Marc Chandler submits:Once the Spanish bond auction event risk passed, the euro’s recovery was extended. While Spain was able to place its paper, it came at a price and that is higher yields. The 10-year bond sale produced a bid-cover of 1.88 (vs 2.03 last time), while the yield rose to 4.84% from 4.04%. The 30-year bond had a better bid cover (2.44 vs 1.4 last) but the yield rose to 5.91% from 4.76%.Nevertheless, the auction illustrates that the Spanish government has not been frozen out of the capital markets and its yields, even with the recent rise, are well below Greece. While the EU finance ministers meeting, beginning today, will no doubt discuss the situation, the recent slew of reports suggesting that Spain needed financial assistance, are likely wide of the mark. Meanwhile, Spain is insisting on publishing the results of the stress test on its banks and reports suggest it is prepared to release results on an individual bank basis. There had been some objection, especially from Germany on grounds that it posed unnecessary risks, but it looks like Spain’s position will carry the day. Recall that the results of the US bank stress test, despite the criticisms at the time, corresponded to a bottoming of that sector and also led to some banks raising more capital.Complete Story »

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Euro-area finance ministers said Greek officials must pick up the pace of negotiations to unlock more of bailout funds, as the country risks running out of cash.
“We have to stop wasting time and really start talks seriously,” said Dutch Finance Minister Jeroen Dijsselbloem, who heads the finance ministers’ group. “We’ve lost over two weeks — in which very little progress has been made. The real talks haven’t started yet. There has been no implementation.”

Marc Chandler submits:The European Commission will give its verdict on Greece's new fiscal initiatives on Wednesday.There are two main issues. The first is the credibility of Greece's macro-economic statistics. Some reports suggest that the new commission established to ensure accuracy of Greece's statistics has covered another 40 billion euro shortfall. To be sure though the reports do not appear to be officially confirmed (yet?).

A day after a Reuters headline blast proclaimed that, in a stunning turn of events, the ECB which has barely started buying covered bond (of countries like Germany today for example, because the record low yielding Bunds clearly need help from the ECB) will also buy corporate bonds, sending the stock market soaring the most in 2014, it has now backtracked for the second time, and following a report from the FT yesterday which denied the report, the second denial came straight from Reuters itself which hours ago

Marc Chandler submits:The US dollar is mixed in choppy trading. The euro has shrugged off a weaker than expected ZEW survey (28.7 vs 42.0 consensus after finding a bid near $1.2170. The BOJ unveiled a new JPY3 trillion loan facility to aid business and, although equity prices are firm, the yen remains somewhat better bid. Slightly softer than expected UK inflation figures have done sterling little good and its remains the laggard among the G7.

Marc Chandler submits:There has been an obvious build-up of expectations about the U.S. jobs report today. The dramatic jump in the ADP estimate sparked a large upward revision in expectations, even though the shortcomings of its estimate and its track record are well known. In part, the optimism also reflects the recent string of data that has convinced even many of the cynics that the U.S. economy has accelerated.

Marc Chandler submits:The US dollar is mixed at the start of the new week. The absence of London markets is serving to dampen turnover. The reluctance of the Bank of Japan to get ahead of market expectations saw the yen recover smartly after the greenback neared JPY86. Initial support for the dollar near JPY84.50 is likely to be tested shortly. For its part, the euro has been confined to its pre-weekend range. Three times in as many sessions, the euro was turned back from approaching $1.2780.

Marc Chandler submits:Stress Test Update: The latest indication is that next Friday the results of the European bank stress tests will be reported in some aggregate (perhaps country level) with details for individuals banks expected in the following couple of weeks.

Marc Chandler submits:Greek debt instruments were sold off on Tuesday amid some disappointment that the EU finance ministers failed to provide more detail or color on official support for Greece. The most likely reason for the lack of detail was that that is the extent of the agreement. We'll have to wait and see.Officials seem committed to verifying that Greece is implementing its fiscal program. The next key date is March 16th, when Greece is to submit a progress report.